Mortgage Choice has issued a warning to borrowers following Tuesday’s official cash rate cut, saying it’s important to remain circumspect when considering home loans.
The aggregator’s head of corporate affairs, Belinda Williamson, says she hopes the RBA’s decision to cut the cash rate by 0.25 percentage points to 3.0% will bring additional “Christmas cheer” to borrowers.
“We hope the decision by the Reserve Bank of Australia to cut the cash rate this month translates into a noticeable up-tick in consumer and business confidence. This has remained subdued for more than twelve months now, despite previous cuts to the official cash rate this year.”
However, for borrowers entering the property market or repaying a home loan, Williamson recommends a heavy dose of caution.
“For those taking the leap into the property market or repaying a home loan, the rate cut this month may seem like an early Christmas present, particularly if lenders pass the cut on in full to borrowers. But as we all know, lenders’ decision to cut rates is never a certainty, so borrowers should check to see what action their lender takes and how this impacts their loan situation.”
Williamson says the rate cut decision, rather than be used as an excuse to splurge – either on a home loan or otherwise – ought to serve as a timely reminder to spend within your means.
When it comes to mortgages, Williamson says the New Year is the perfect time for borrowers to review their current home loan to see if they can cut costs further by negotiating a better deal, or find a better offer elsewhere.
“With Christmas spending top of mind this month, there are many ways to ensure you stay out of the red this festive season, and even make savings on your home loan and other financial commitments. The trick is to spend a little but to keep the costs within your means.”